DBAs in Civil Litigation: “Islands of legality in a sea of illegality”

The High Court’s decision in Reeves v Frain & McKinnon [2025] EWHC 2311 (KB) offers important clarification on the enforceability of Damages-Based Agreements (DBAs) in probate litigation. This case highlights the continued relevance of champerty, the need for strict compliance with the DBA Regulations 2013, and the risks of relying on DBAs in civil litigation.

Background

In September 2025, Mr Justice Dias handed down a significant decision clarifying the enforceability of Damages-Based Agreements (DBAs) in civil litigation. The case, which arose from a bitterly contested dispute over the £100 million estate of Kevin Frain, has significant implications for litigation funding and costs recovery.

The dispute centred on two competing wills: a 2012 will and a later 2014 version which radically altered the distribution of the estate. Louise Michelle Reeves, the deceased’s daughter, sought to uphold the 2014 will, which left her 80% of the residuary estate. Her half-brother Simon Frain and nephew Mark McKinnon challenged the validity of the 2014 will, alleging undue influence and lack of knowledge and approval.

Following a three-week trial in 2022, the 2012 will was upheld. However, the costs implications were substantial, with the appellants’ legal fees, funded in part through DBAs with LLP Solicitors, were estimated at over £1.3 million. The appeal focused on whether the DBAs were enforceable under the Courts and Legal Services Act 1990 and the Damages-Based Agreements Regulations 2013.

Key Issues on Appeal

The appeal raised two principal issues:

1. Whether payment under a DBA is only permitted out of sums recovered by the client from another party; and
2. Whether the DBAs in question were materially compliant with the statutory framework and therefore enforceable.

The DBAs provided for payment of 10% and 24% of any financial benefit obtained by Simon Frain and Mark McKinnon respectively. However, the claim was for a declaration regarding the validity of a will, and no monetary recovery was sought or obtained.

Decision

Mr Justice Dias upheld the earlier ruling of Costs Judge Brown, finding that the DBAs were unenforceable, citing the logic and analysis in Candey Ltd v Tonstate Group Ltd (2022). The judgment provides a detailed statutory and purposive interpretation of key terms such as ‘payment’, ‘ultimately recovered’, and ‘financial benefit’ contained within the statutory framework, finding that:

• No sums were recovered in the proceedings, as the claim was declaratory in nature. Therefore, the DBAs failed the core requirement that payment must be contingent on recovery.
• The DBAs excluded Counsel’s fees, treating them as expenses rather than part of the payment structure, contrary to the Regulations.
• The firm had improperly used an employment-style DBA in a civil litigation context.
• The creation of ‘fresh retainers’ post-judgment was deemed an attempt to circumvent the original agreement and did not cure the underlying effects, nor did the blue pencil test.

The court emphasised that DBAs must be interpreted narrowly and that any deviation from the prescribed structure risks rendering the agreement void.

Quantum Meruit Possibility

While quantum meruit remains a recognised equitable remedy, its application in the context of non-compliant DBAs is fraught with difficulty. Theoretically, a solicitor might claim reasonable remuneration for services rendered outside a valid contract. However, in this case, the court found the entire retainer structure to be fundamentally flawed, and such a claim would leave the client liable to pay their own solicitors without any prospect of costs recovery from the other side. To allow recovery on a quantum meruit basis would risk undermining the statutory protections embedded in the DBA Regulations 2013, particularly the requirement that payment be contingent on recovery.

The court’s approach strongly suggests that non-compliant DBAs cannot be salvaged by alternative routes such as quantum meruit. As Mr Justice Dias observed, DBAs are “islands of legality in a sea of illegality”, and any attempt to swim beyond their narrow statutory confines, whether by fresh retainers or equitable claims, is likely to flounder.

Practical Implications